Introduction

I recently attended my child’s elementary school science fair and was intrigued to find game mechanics employed by the fair’s planners. The fair had several rows of “exhibits” (students’ science projects) and a number of students were seen walking studiously from project to project, with a rectangular slip of paper. It turns out the paper was a game card (pictured above), with a list of projects that students needed to find (and check off the list).

The Challenge and Completion Dynamics

I was struck by how many students were participating in the “game,” all under the premise of “you will get a prize if you are a lucky winner.” Adoption was strong because it tapped into a challenge dynamic. Kids were presented with a challenge (“go find these exhibits”). And importantly, there was a structure behind the challenge: the completion dynamic (“find all of the exhibits, then return the card to a volunteer”).

Since a completed card merely got a student a raffle ticket (after which they’d need to hold a winning ticket to gain a prize), motivation was driven by the challenge dynamic – something to keep in mind as it relates to B2B events (i.e. understanding and taking advantage of attendees’ motivations, rather than simply offering up iPads as prizes).

Pros and Cons

Pros: Participants in the game reviewed many more projects than they otherwise would have. Case in point: some students who did not play the game could be found lounging outside the fair, socializing on the patio.

Cons: More a consideration than a negative – game designers need to understand the “completion dynamics.” For the science fair, it’s a good thing for game players to visit many exhibits. The ideal visit is one where the visitor reads through the science project and gains an appreciation for the hypothesis and the result.

The non-optimal visit is the “drive by,” where the visitor is purely motivated by finding another item to check off the list. Good game design will motivate players to immerse themselves in the game, rather than play the game solely to achieve the end result.

In the second half of 2010, the term “gamification” became bi-polar: you either loved it or hated it. People on the “love” side see it as the future of engagement and marketing. People on the “hate” side see it as a gimmick.

Gabe provides his thoughts in an article at Huffington Post. While the term is effective in capturing the essence, it’s not perfect. As a result, “gamification” will be used less and less in 2011. In its place will be a set of new terms, based on its specific applications (e.g. game-based marketing, game-based social initiatives, etc.).

A Sub-Industry Develops

This is more an observation, rather than a prediction (since it’s already happening): an industry has developed around “gamification”. When folks convene for a conference or summit, that’s my measuring stick to tell me that an industry is emerging. In the virtual events space, that happened in 2009 with the Virtual Edge Summit (which, by the way, has its third annual conference, also in January 2011).

If you look at the sponsor and speaker lists for this event, you’ll see a number of start-ups who built their business around gamification. In 2011, we’ll see some “bubble like” behavior (perhaps we’re already seeing it now), where entrepreneurs look to build the next great gamification companies. In the second half of 2011, however, the bubble settles and the early winners emerge.

Jane McGonigal of Palo Alto-based Institute for the Future once said, “Any time I consider a new project, I ask myself, is this pushing the state of gaming toward Nobel Prizes? If it’s not, then it’s not doing anything important enough to spend my time.” (source: Salon.com article from 2007).

In 2011, we’ll see game mechanics applied increasingly to the “greater good” – initiatives that can change the world.

Armchair Revolutionary is a great example – consider one of their slogans, “shape the future by playing a game”. In 2011, lots of “revolutionaries” emerge to rally those who can, to provide help to those in need.

Game Mechanics Go Mainstream – But Consumers Don’t Know It

Game mechanics are going mainstream, but the typical user won’t know that they’re participating in them. They simply know that they’re engaging in enjoyable activities (side note: there will be similar growth in Foursquare, Gowalla, etc., but users, of course, won’t know that they’re using “location based services”).

For example, Universal Studios announced successful sales of their “Despicable Me” DVD – their press release attributes some of the success to a “Minions Madness” promotion, “a points-based reward and social media program spotlighting the film’s beloved mischief-makers, the Minions.” This promotion was powered by Bunchball, a game mechanics start-up.

Bunchball (and related companies) has built a nice client list of broadcast networks, cable networks and film studios. In 2011, additional media outlets come on board. Game mechanics go more and more mainstream, even though the typical mainstream user doesn’t know it. Watch out in 2012, however, as consumer-based game mechanics suffer some fatigue (as consumers then see “much too much” of it).

Google adopts game mechanics as a means for bridging their search business and social services (e.g. adding game mechanics to Google Me). Others who add game mechanics include Netflix, eBay and Groupon. Of course, it’s natural to expect that more and more virtual event experiences will add game mechanics, too.

Conclusion

2010 has been an interesting year for gamification. 2011 will kick off with an industry event and where we go from there will be exciting to watch. I’ll check back mid-year with a report card on these predictions. Here’s hoping I attain the “crystal ball badge”.

Social gaming start-ups are a hot commodity these days. In the past 12 months, Playfish was acquired by Electronic Arts and Playdom (more recently) was acquired by Disney. Zynga, which remains independent, has a valuation that’s reported to be as high as $5B. I expect that CrowdStar, another independent gaming start-up, will be acquired before 2010 closes.

These gaming companies provide “free to play” games on the web and on smartphones. They then sell virtual goods (within the games) so users can achieve an elevation in status (e.g. a sharper sword, more crop for the farm, designer sunglasses to replace your generic pair, etc.).

Sustainable Growth Can Be Challenging

These gaming start-ups have attractive attributes:

Ability to generate hundreds of millions in revenue (in some cases, more)

High growth rates in users, revenue

High profit margins, since the “cost of goods” (for virtual goods) is virtually zero

While it’s hard to argue with the results that these start-ups are turning in, I wonder if we might be in a mini-gaming-bubble, in terms of current valuations and the potential of sustainable, long term growth.

Social games can be similar to the recording and film industries. Success depends on the blockbuster hit. Over time, it becomes more and more challenging to consistently produce the blockbusters, especially in the face of growing competition. Today, Facebook serves as a great “record label” for the gaming companies. It provides a marketing vehicle that you can’t find anywhere else – “distribution” to its 500+ MM “listeners” (users).

The gaming companies know, however, that they can’t put all their eggs in the Facebook basket – hence, the plans from Zynga to launch their own Zynga Live platform (as one example). The gaming companies need their blockbuster hits to turn into self-standing brands (e.g. FarmVille), which then relies on a variety of distribution vehicles.

We know that consumers can be fickle, however. Recall the progression of “hot social network”, from Friendster to MySpace to Twitter/Facebook. Games will have a related challenge. FarmVille is not going to be the #1 game forever, which means that Zynga is already figuring out the “next FarmVille”.

I believe there will be a short list of winners in a market that will be increasingly fierce. In addition, I wonder if over the long term, the rate of virtual goods purchasing is sustainable – or whether it will continue to grow over the long term.

A New Game in Town?

One of the challenges of the virtual goods model is the funding source. Revenue growth is dependent on fickle consumers, who could love your game one day and move on to another game the next day. And yes, I realize that part of good game design is to build in the hooks to create user loyalty.

That being said, what about services whose funding source comes from brands that want to reach consumers? The bills in their “wallet” are of higher denominations than the $1’s and $5’s that consumers use to purchase virtual goods. In addition, “brands are already brands”, which mean that they have a pre-existing following from consumers.

Foursquare

Consider Foursquare. Some consider it a “location based service”. I view Foursquare as an engagement platform that’s built on top of a location based system. In fact, Foursquare has a loyalty program that generated successful outcomes for Starbucks, Ben & Jerry’s, Whole Foods and many others.

The Foursquare business model is both powerful and scalable: powerful in its use of technology (e.g. location based check-ins) and scalable in leveraging existing brands (e.g. Starbucks) for the consumer following and activity.

Location based technology is great, but the long term success of Foursquare is more about the engagement and loyalty programs it facilitates for brands, based on the applicable and available technology of the day.

Nitro Participation Engine from Bunchball

Keep your eye on the Nitro Participation Engine from Bunchball – a Silicon Valley start-up who counts NBC, Warner Brothers and Victoria’s Secret as clients. The Nitro engine “drives participation using Gamification”, which means that any brand can easily add gaming elements to their web site(s) – and then leverage the Nitro engine to track user actions, points, status and leaderboard. In addition, brands can use Nitro to deploy and sell virtual goods.

What This Could Mean

I think we could be witnessing a transformation of the advertising industry. If the 90’s and the 00’s were about banner ads and paid search, this coming decade could be about engagement and loyalty platforms.

Foursquare, Bunchball and others have much to gain – if they can tap into a small percentage of the $100+B spent on advertising annually, they’ll make their investors very happy.

These engagement platforms can move from brand impressions (90’s) to brand engagements – where the engagements are longer lasting and more valuable than a click on a paid search ad. They’re more participatory and can result in immediate purchases (e.g. the latte that someone just purchased at Starbucks). In addition and perhaps more importantly, they enhance loyalty between consumers and brands, which is great for the long term.

Of course, sustainable growth is a challenge with any technology. Engagement platforms will face their own challenges as they see adoption grow. Consumers will only be able to participate in so many engagement or loyalty programs. That being said, consumers are taking batting practice right now – the first inning has yet to start. Enjoy the ballgame!

I’ve now managed to speak enough. Leave a comment below to share your thoughts on this topic.